The Other Side of ZZZZ Best Probe : Police Learn How Mob Moved In on Minkow

RONALD L. SOBLETimes Staff Writer

As Maurice Rind told it to the Los Angeles Police Department's organized crime investigators, "We were protecting the kid from being extorted by everybody. . . . We didn't want the kid to get shook down. We were the police force."

"The kid" was Barry Minkow, who turned his Reseda-based ZZZZ Best carpet cleaning company into a hot stock on Wall Street, but who now is in Terminal Island federal prison awaiting trial on federal racketeering and fraud charges.

"We" meant Rind and his partner, Richard Schulman, Encino neighbors and old friends from New York who have criminal records and links to organized crime, according to police.

$1-Million Profit

They were looking after Minkow's health, Rind told detectives, to protect what proved to be a remarkable investment. In one ZZZZ Best stock deal alone, police determined, Rind and Schulman had reaped more than $1-million profit each.

"Everybody was taking shots at (Minkow)," said Rind, 49, referring to reputed mobsters who wanted a piece of the ZZZZ Best action.

But if Rind and his partner were the 21-year-old Minkow's protectors, the relationship was not exactly affectionate. As ZZZZ Best was collapsing last summer, headed toward bankruptcy and criminal investigations, Minkow visited the two men and declared, "You're going to kill me . . , " Rind told police.

Rind said he then hugged Minkow, but hardly to console the apparently shaken young entrepreneur--he was frisking Minkow to discover if his body had been wired with a police microphone.

Rind's comments to detectives are contained in more than 150 pages of reports compiled by the Los Angeles Police Department's Organized Crime Intelligence Division as part of an investigation that began last March.

Usually Confidential

Normally, such reports--describing long interviews with suspects and witnesses, as well as surveillance notes--remain confidential and are made public only at a trial, if then. In this case, however, the division's documents were subpoenaed, and then released--before the investigation is even completed--by the House subcommittee on oversight and investigations, which held two recent hearings in Washington on the ZZZZ Best collapse.

The documents, presented to the committee by Detective Mike Brambles, deal with a side of the ZZZZ Best scandal other than the recent federal indictment of Minkow and 10 others. That indictment focused exclusively on white collar crime, alleging that Minkow and others drove up the value of ZZZZ Best stock by fabricating millions of dollars of contracts from insurance companies. The case involved a classic "sting" operation: ZZZZ Best officials allegedly staged tours of high-rise buildings to dupe lawyers and accountants into believing that they actually were doing million-dollar jobs repairing water and fire damage.

The police reports, which officials said may not produce arrests until spring, tell the organized crime side of the story: How ZZZZ Best allegedly was exploited by East Coast-based Mafia families. And they describe people using not just deception, but displaying guns and issuing threats with talk of "outside muscle" and "cleaning and investing" money.

A major theme running through the documents is the central behind-the-scenes role of Rind and Schulman, neither of whom was named as a defendant in the federal indictment but both of whom were identified by Police Chief Daryl F. Gates at a July press conference as suspects in the LAPD investigation.

Ties to Crime Alleged

The documents indicate that the pair, who Rind insists are legitimate businessmen, were the last of a series of men with alleged organized crime ties to gain interests in ZZZZ Best amid infighting and the forcing out of a prominent Los Angeles mob figure, the late Jack M. Catain Jr.

Unknown to the Establishment business community, which was helping ZZZZ Best gain a paper value of more than $200 million, 75% of a shell company used to take the business public "was owned by individuals with convicted felony criminal backgrounds," detectives said.

Court records previously filed show that Minkow turned early to Catain for help when he had trouble getting conventional financing for the company he started in his parents' garage. But the two men had a falling out and Catain sued Minkow in December, 1985, contending that he was owed $1.3 million as part of a deal in which he arranged loans for ZZZZ Best and received a 50% interest in the insurance restoration business.

In the just-released police documents, Rind is quoted as saying that "other guys . . . kicked Catain out." Rind does not name the others, but investigators said it was a reference to Robert Victor, 51, of Woodland Hills, who is identified in the police reports as "a reputed member of the Colombo organized crime family."

Not a 'Made Guy'

Rind noted that Catain, who died last February, was not a "made guy," meaning that he was never inducted into an organized crime family.

Victor also is not a defendant in the federal case, but was named by Gates as a suspect in the organized crime investigation. The police reports say that Victor, who changed his name from Robert Viggiano, has "an arrest record with the Los Angeles and New York police departments for conspiracy, forgery, extortion, robbery, theft of interstate shipments" and other crimes.

After agreeing to be interviewed by detectives, Victor said he "has been trying to be a good businessman since his release from prison" and that he met Minkow by chance in 1985, when he sold the young man an automobile from his Sepulveda car business, Reliable Auto Repair. Minkow began playing on the auto shop's baseball team, and eventually Victor "entered into a business deal with Minkow which would provide him with 50% of (the) profits from restoration jobs by providing financing," the police reports say--the same deal Catain claimed he had earlier.

Rind told police that Victor next asked Schulman--with whom he had served time in prison--to come from New York to join the effort. Finally, Rind said, he too was introduced to Minkow by Victor.

Arranged Financing

Eventually operating through a company they called Richman Financial Services, Rind and Schulman arranged additional financing--and orchestrated important business moves--not only for ZZZZ Best, but two other Los Angeles-area enterprises: Splash, a trendy Malibu restaurant, and Art World Industries, an art sales firm.

The two men, who live within a short walk of each other in the San Fernando Valley, are portrayed in the documents as a partnership of brains and muscle.

A street-wise, colorful figure who grew up in the Forest Hills section of Queens, N.Y., Rind speaks in a rapid-fire business lingo, often ending his sentences by asking: "You understand?"

Rind's background includes two criminal convictions involving securities and mail fraud. A one-time stock broker, he was barred from the securities business in 1978 by the Securities and Exchange Commission.

According to the police reports, Rind has "connections with organized crime," and law enforcement officials said he has gained, within those circles, a reputation as a financial genius of sorts.

'Extensive Arrest Record'

The record of the 5-foot, 8-inch, 275-pound Schulman, on the other hand, reflects a tougher, street-crime orientation. According to the police reports, Schulman, raised in the Williamsburg section of Brooklyn, N.Y., "has been imprisoned for extortion and conspiracy" and has "an extensive arrest record" for burglary, bookmaking, assault and other crimes. He is further identified as "a reputed associate of the Genovese crime family."

Schulman, 53, has declined to be interviewed. But Rind, in an interview last year, said Richman Financial--based in Schulman's town house--is a legitimate firm established to provide venture capital for businesses getting off the ground. Richman Financial's activities have been underwritten with "money we made in the stock market, every goddamn cent of it. . . . We don't do anything illegal," he said.

"The cops can say anything they want . . , " he told reporters in the kitchen of his two-story town house. "They can investigate us now until the world comes to an end, and they wouldn't come up with nothing."

In a move that surprised authorities, Rind called prosecutors soon after Gates' press conference and volunteered to come downtown to the district attorney's office and discuss the case. The police reports show that, at the lengthy meeting that followed, Rind readily talked about various reputed organized crime figures, his own enterprises and the meaning of entries on his ledgers, which had been seized under a police search warrant.

Maintains Innocence

Through it all, he maintained his innocence.

Rind told detectives that he was a legitimate financier and investor in ZZZZ Best, and that he was as shocked as anyone to learn that insurance repair jobs were fabricated--that he was, in essence, a victim of the fraud.

"I was doing my investments and whatever I do," he summed up his role.

Among the things he did, according to the documents, was to orchestrate two moves in 1986 that enabled ZZZZ Best to grow from a local service company to a firm that climbed in value on Wall Street.

First, Rind told detectives, he arranged the "shell route" that ZZZZ Best used to go public--merger with a defunct Utah company.

Then he helped arrange the purchase of electrical generators from the Cayman Islands, hardware that ZZZZ Best claimed was worth $2 million--the amount of assets required for a company to gain a listing on the over-the-counter stock market.

Police said the generators actually were worth $200,000.

High-Interest Loans

Rind and Schulman also helped ZZZZ Best get money for insurance restoration projects by putting Minkow in touch with Jay Botchman, who ran a Montvale, N.J., firm that makes high-interest, short-term loans to individuals and companies that cannot obtain conventional financing.

Botchman, who has not been accused of any wrongdoing in the case, told detectives that his company, JLB Equities, made three loans to ZZZZ Best--for $350,000, $400,000 and $2.1 million--at a 24% annual interest rate.

In his police interview, Rind also identified a New Jersey reputed crime figure as the "drug connection" for ZZZZ Best. The information apparently relates to a statement made by Gates that crime families had used ZZZZ Best, the Splash restaurant and other businesses "for laundering large organized crime profits from narcotics trafficking."

Rind discussed this subject reluctantly with detectives, saying, "I'm not here to give up people."

Detectives finally asked Rind what organized crime family was involved. "Out of Jersey," he said.

"Rind was asked if the individual was Martin Taccetta," according to detectives' accounts. "Rind acknowledged affirmatively by nodding his head and stating . . . 'Taccetta is the drug connection. . . .' "

Currently on Trial

Taccetta, 34, of Florham Park, N.J., is one of 21 men currently on trial in federal court in Newark, N.J., on charges of operating drug, gambling and other illegal activities in that city. Prosecutors have alleged that the men control the New Jersey arm of the Lucchese crime family, one of the five major Mafia families. Taccetta's older brother, Michael, also a defendant, is alleged to be the "underboss" in charge of the New Jersey operation.

An exasperated Rind seems to assume that Martin Taccetta had discussed his role with authorities, saying, "now Taccetta gets caught and he becomes a rat, he gives up the story."

The documents do not detail how illegal drug proceeds may have made their way to ZZZZ Best.

In his own defense, Rind told the detectives that he discovered only through Minkow's confession to him in ZZZZ Best's last days that the firm was largely a house of cards.

He was at Schulman's town house, Rind recalled, when Minkow walked in and told them: "You're going to kill me. I resigned, everything was a Ponzi, (a scheme in which early investors are paid off with later investors' money) whole thing was phony, no restoration jobs--they're all phony."

Report Describes Tale

The police report describes Rind's telling of the rest of the episode:

"Rind stated he said goodby to Minkow and hugged him. Rind stated that he hugged Minkow so he could frisk Minkow for a wire. . . . Detectives asked Rind why he frisked Minkow for a 'wire' if he felt he had been swindled by Minkow.

"Maurice Rind told detectives to examine the 'cast of characters' and referred to the criminal backgrounds of himself, Schulman and Ronnie Lorenzo. Rind further stated that organized crime investigators monitor Lorenzo's activities daily."

Ronnie A. Lorenzo, 42, is the manager of the Splash restaurant and is described in the police reports as a member of the New York-based Bonanno crime family.

Rind said that when he and Schulman had a problem, according to the reports, "he would ask Ronnie Lorenzo to 'intercede.' Rind advised that 'Ronnie took care of outside muscle."'

There is no elaboration.

'Protective Measures'

The reports describe other "protective measures" adopted by Rind and Schulman.

They spent $532.50 on a "bug detector," as it was described on Richman Financial's ledgers. The device was discovered during a series of police searches in July, as was a list titled "unacceptable names," which identified FBI, Secret Service and IRS informants in fraudulent loan, real estate other white collar crime cases in the United States and abroad.

Worry about police surveillance appeared to be a small price to pay, however, for the huge profits apparently reaped by Rind and Schulman, as well as by Minkow and Victor.

Detective Brambles, who along with Detective Jeff Redman spearheads the investigation, told the House subcommittee that when ZZZZ Best acquired the defunct Utah company to go public in January, 1986, the four men paid $20,000 for equal shares of the shell firm. A year later, they sold those shares for $4.5 million, he said.

Despite the profits, there eventually was a falling out between the Rind-Schulman partnership and Victor, according to the documents. Rind alleges that Victor knew that the insurance jobs were "no good from the beginning" and used the information to extort money from Minkow.

Tells of Money Drops

Rind does not detail how the extortion worked. But elsewhere in the police reports, one witness describes hearing that a top ZZZZ Best executive would drop bags of money in bushes by Victor's home.

Victor himself, in his interview with police, "stated that he was very close to Maurice Rind and that they never had a disagreement," detectives reported. Victor "denied involvement with laundered drug money," the documents state.

Victor was beaten up last April by unidentified men on the grounds of a ZZZZ Best subsidiary in Chatsworth, according to a police interview with a company executive.

Those are not the only instances of a threat or violence cited in the reports. They quote a ZZZZ Best machinery operator as saying that Rind and Schulman threatened him when he refused their request that he write up some false bills.

The worker "was told that his face could be used to clean up the workshop area," police report.

Vague About Roles

Rind was vague in talking about his and Schulman's role as a "police force" protecting Minkow, although he readily admitted the motivation in one interchange reported:

Rind explained to detectives that, "Everybody was taking shots at (Minkow) . . . guys out of San Diego, I don't want to tell you."

But, again, there is no elaboration.

Another incident cited in the reports involved Norman Rothberg, 52, of Marina del Rey, a former Internal Revenue Service accountant who said he tried to blow the whistle on the phony insurance restoration business.

Rothberg told detectives that he went to work in March, 1987, for Interstate Appraisal Service, the firm listed on ZZZZ Best's books as providing it with millions of dollars in insurance jobs. Rothberg, according to police records, said he "heard through the grapevine" that the restoration jobs were fabricated and made two calls: one, on an anonymous basis, to the Securities and Exchange Commission's Los Angeles office, the other to ZZZZ Best's accounting firm, Ernst & Whinney, to tell them of the "phony scam."

'All Hell Broke Loose'

Then, last Memorial Day, Rothberg recalled, "all hell broke loose."

While at Interstate Appraisal's Culver City office, he was summoned to a desk where he found company employees Mark M. Roddy, 36, and Brian Morze, 41.

As Rothberg told it: Roddy, who is 6 feet, 1 inch, and weighs 255 pounds, placed a handgun on the desk, and Morze declared, "We have a problem." Then Morze picked up the gun and pointed the barrel into his--Morze's--mouth. "We have to work out this problem or we are going to lose everything," Morze said.

Shortly afterward, Rothberg told detectives, he met with Minkow and Morze, and Minkow offered him a $25,000 payment, plus $1,000 a week for three years, if he would call Ernst & Whinney and change his story. Rothberg agreed.

In his own interview with police, Morze denied that he picked up a gun before the accountant. Police said Morze acknowledged, however, that Thomas G. Padgett, the head of Interstate, was a gun enthusiast and keeps a .45 caliber automatic in his desk.

Morze and Padgett last week pleaded guilty in the federal case to various fraud counts. Roddy also is a defendant, as is Rothberg, who is accused of "aiding and abetting" the conspiracy by accepting a bribe to recant his story.

Routine Police Action

According to the reports filed in Washington, the organized crime investigation actually began months before ZZZZ Best unraveled, triggered by a routine police action unrelated to the carpet cleaning company.

The start came a few minutes after midnight last March 3, when intelligence officers showed up at Splash, a seaside dining hangout of Malibu's celebrity crowd at the foot of Point Dume, and arrested Lorenzo. The warrant they carried was a seemingly minor one: Lorenzo had failed to pay $300 on a fine levied eight years earlier in New Jersey for illegal possession of a handgun.

But the interest of detectives was piqued when, according to the reports, "Lorenzo made statements that under the new ownership (of Splash) he would be 'what is known as a hidden owner'. . . . Lorenzo made further statements which were indicative that he was skimming profits from Splash."

Lorenzo, through a lawyer, has declined to be interviewed. But one of the restaurateur's friends, actor James Caan, ridiculed the police accusations as "a lot of crap."

Lorenzo "is a family man," Caan told The Times. "He doesn't even speak out of the side of his mouth."

Investigation Expands

The investigation expanded beyond Lorenzo, the police documents indicate, when detectives found that he was driving a 1986 Pontiac registered to Richman Financial Services. Subsequently, Rind told detectives that Richman Financial "bought out" Splash, although the restaurant is listed on state records as being owned by another Los Angeles firm.

Rind also said that Richman Financial made possible the expansion of Art World Industries, with him arranging for the company "to go public through a shell route, the same shell route I did ZZZZ Best."

A resulting sale of stock raised $3 million for Art World in 1986, for which Rind and Schulman received 8% of the stock--shares then worth about $500,000. "They did a good job for us," a firm spokesman said of Rind and Schulman.

The principals in Art World have not been accused of wrongdoing, but Gates alleged that the firm was used in the organized crime money-laundering operation. Indeed, several figures in the case are described in the police reports as converging one evening last April on the art business offices near Culver City.

Brambles and another detective followed Lorenzo's 1985 BMW there shortly before Rind also arrived "in a Cadillac limousine which was being driven by Joseph Mangiapane."

Served as Bodyguard

Mangiapane, 49, a Queens native who moved to Canoga Park, "is a reputed Lucchese organized crime associate" with a criminal record including arrests in New York City for bookmaking and possessing stolen property, the reports state. Mangiapane, an occasional boxing trainer, lived in a town home owned by Minkow and frequently served as a bodyguard for the young executive, driving him around in the same $48,000 limousine, police said.

From the sidewalk adjacent to art company offices, detectives said, they could hear through open windows Lorenzo loudly arguing with Rind and Mangiapane:

"Ronnie Lorenzo was arguing about 'cleaning and investing the money . . . back in New York. . . . Ronnie Lorenzo yelled loudly that he does not 'want to face the boss without an answer about what to do with the money.' "

"The boss" is not identified.

Neither Minkow nor his attorney, Arthur H. Barens, would comment on the police reports. "I haven't read any of the materials," Barens said.

Conversation Taped

Minkow was not interviewed by the detectives. But the reports include a transcript of some of his comments during a telephone conversation last Oct. 22 with Daniel B. Krowpman Jr., a former ZZZZ Best board member and co-defendant in the federal indictment. Krowpman agreed to have the conversation taped, police said. During the call, Minkow advised Krowpman not to talk to authorities ("Danny, take the Fifth Amendment") and discusses the basis of his defense ("It was done without my knowledge. . . . I didn't have any knowledge jobs were phony.")

There also is a brief discussion of other people named as suspects by Gates.

Krowpman: "Who owns Splash?"

Minkow: "A legitimate guy--Ronnie Lorenzo."

Krowpman: "I met Maurice (Rind) at Splash one night. He said he owns the stock in (ZZZZ Best's) equipment company."

Minkow: "Absolutely."

Krowpman: "That's what he told me."

Minkow: "That (expletive) not only owned the gosh darn stock, but he did that whole generator deal which (expletive) me up. I never even wanted to do that stupid deal."

Krowpman: "There's no organized crime involved in this thing at all?"

Minkow: "Not that I know of."

Times staff writer Tom Furlong contributed to this story.

KEY FIGURES IN ZZZZ BEST DOCUMENTS

MAURICE RIND: A native of New York now living in Encino, he twice was convicted of securities fraud in the 1970s. The documents turned over by Los Angeles police to the House oversight and investigations subcommittee portray him as the behind-the-scenes brains in moves that made possible public trading of stock in the ZZZZ Best carpet cleaning company. He was a partner with longtime friend and neighbor Richard Schulman in Richman Financial Services, a firm that helped obtain financing for ZZZZ Best and other Los Angeles businesses.

BARRY MINKOW: The documents portray the 21-year-old kingpin of ZZZZ Best as a sometimes reluctant business partner of Rind, Schulman and Robert Victor, "a reputed member of the Colombo organized crime family." When his company was collapsing, he reportedly visited Rind and Schulman and declared, "You're going to kill me." In a telephone call taped by police, Minkow says his defense to fraud charges will be that "it was done without my knowledge," and that he had no knowledge of organized crime involvement in his company.

JACK M. CATAIN JR.: The first reputed crime figure to gain an interest in ZZZZ Best, he arranged loans for Minkow before the two men had a falling out and Catain sued for $1.3 million. He long has been described as one of Los Angeles' well-known mobsters, but Rind is quoted by police as saying that "other guys . . . kicked Catain out" of the ZZZZ Best picture. Catain died last year before his suit with Minkow was settled and before he could be sentenced on a 1986 conviction for conspiracy to sell $3.3 million in counterfeit money.